French Surging Yields Is Bad News

Investors see the writing on the wall. And that’s why they’re fleeing French 10-year government debt: They purged $32 billion worth in the fourth quarter of 2016 and even more in recent weeks.

And that’s pushed French yields through the roof.

In fact, if you compare French yields to German bunds, you can’t miss that the difference between the two is quickly approaching levels not seen since the last sovereign debt crisis …

As this chart clearly shows, the surge in French yields compared to German bunds is at its highest level since 2012.

And the higher yield differential comes in the face of better-than-expected French economic readings.

Reason? Sluggish economic growth and mounting debt have already left many countries in the eurozone on the brink of economic and political collapse.

And the French debacle is just the latest installment in the growing sovereign debt crisis.

Another concern weighing over French government debt – and that of other European nations – is the European Central Bank’s plan to slow monthly bond purchases by 25% in April.

This means less government support of lousy debt.

Other eurozone countries on the brink include Italy, Portugal and Greece: Their bad debts are weighing on bank balance sheets like a lead balloon.

  • Greece is already bankrupt, with 79% more money going out every year than every man, woman and child in Greece can earn.
  • Italy’s banking system is on the brink of collapse, owing 32% more than GDP. Portugal’s not far behind at 30%.
  • How about Spain? The entire population of that nation would have to fork over ALL of their annual income in taxes just for the government to break even.

You read that right: Fork over all of their income!

These are just a few examples of eurozone countries owing MORE than their people and businesses can produce.

Now, throw in Brexit and Prime Minister May’s insistence to leave the EU and you have a recipe for disaster.

And don’t forget: This year’s upcoming elections are liable to put the region into an even bigger tailspin.

It’s all part of the sovereign debt crisis that I’ve been warning you about.

And that’s why I recommend you dump investments that are tied to the euro before it’s too late.

Best wishes,

Larry

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Comments 16

  1. Malcolm February 22, 2017

    Add that to the enormous US government debt and there’s only the Chinese yuan left as a safe haven currency.
    😉

    Reply

  2. Greg Olson February 22, 2017

    Dump the investments, ya. Everyone knows they are in DEEP trouble. We don’t need another story about that. I want to know what to buy to take advantage of their steep decline. How do we make money as they collapse?

    Reply

  3. Dr Bill Metler February 22, 2017

    I so totally buy into your scenario with my own analysis of US stock market and your K-Wave approach. My work “suggests” a peak S&P 2530ish in US stock market during May and June. The “neckline” of the DOME top will occur in early July 2017. Pls advise as to your “odds-on” guess about when things roll over basis your K-Wave work.

    Reply

    • Pete February 23, 2017

      I believe that the market will collapse before 2530 is reached.

      Reply

  4. Gary February 22, 2017

    I don’t understand what happens to the inverse ETF, which is EUO when the euro tanks. I know the ETF will go up BUT if the euro goes away what will happen to EUO?

    Reply

  5. Anthony Pagan February 22, 2017

    Larry, I’ve been reading that Europe is going to collapse for the past several years. Exactly how and when is it going to happen? When are the bond rates in the US going to rise, another one that is supposed to happen.

    Something akin to peak oil until that was no longer a story and the world is awash in oil.

    Reply

  6. Charles February 22, 2017

    OK… you say “And that’s why I recommend you dump investments that are tied to the euro before it’s too late.”

    Should we buy EUO (ProShares UltraShort Euro)?

    Reply

  7. Thomas Conrad February 22, 2017

    How do investors purge debt?

    Reply

  8. Marion February 22, 2017

    It looks that all countries are in deep debts, as well as most people. Also banks are on the edge of collapse, so where is All the money? According

    Reply

    • Peter Hladik III February 23, 2017

      The money is in the stock market. That’s where the bank deposits are.

      Reply

  9. Steve Lynham February 22, 2017

    I think you missed a crucial point when you wrote “… and Prime Minister May’s insistence to leave the EU “. It is NOT Prime Minister May’s “insistence”, it is that of the UK citizens who, for once, were given the right to decide their own futures (that ‘right’ was given by Cameron in an electoral plot which backfired on him, but that is another issue). If you read your own piece above on the disintegration of the EU economically and politically, you surely cannot be surprised that we want OUT before we get dragged down into the ‘bog’ with the other countries. Brexit means a new start for the UK, away from the handcuffs of EU membership, and as we rise like a phoenix the EU will drop like a dead duck.

    Reply

  10. Bernhard Ebner February 23, 2017

    As French 10 year yields are below 10 yr Treasurys, doe this mean that the US is in worse shape than France?

    Reply

  11. Jas February 23, 2017

    Are we gonna see another gold tranche or a return to the gold bullion standard. Could this possibly lead to an avalanche of leverage taken on by small to medium size firms in the private sector?

    Reply

  12. James V Burnette February 23, 2017

    Lets say that those in the European Union falter and their economies go under. That will trigger a downturn in the economies around the world. It will effect economies throughout Europe, Africa, The Middle East, Russia, South America, Asia and China. Because of low oil prices the major oil producers, the Middle East, Russia and the U.S. are all struggling. The U.S. oil industry is struggling because it cost more to get our oil out of the ground and process it than they can get at the pump. Saudi Arabia is borrowing money to pay its commitments and most of the other Middle Eastern oil countries are tied up in civil wars and fighting terrorist. Venezuela and Brazil are collapsing as we speak. China is so dependent on foreign trade, if other countries around the world can’t buy their products China will fold as well. The problems with the French, as discussed above, is only the tip of the iceberg.

    Reply

  13. Phil February 23, 2017

    Larry gold ran up 17.50 and gold stocks did nothing!!! What’s happening here?

    Reply

    • Peter February 27, 2017

      Shares ran up too much – more than in 2016 – needs to correct for a while – normal procedure

      Reply